Thailand Hikes Interest Rates To 2.0 Percent

[webfact]

Thailand hikes interest rates to 2.0 percent

BANGKOK, December 1, 2010 (AFP) - Thailand's central bank raised interest rates for the third time this year on Wednesday, as predictions of an expanding domestic economy fuelled inflation expectations.

The Bank of Thailand hiked the cost of borrowing to 2.0 percent, up from 1.75 percent, as assistant governor Paiboon Kittisrikangwan said the country's "economic fundamentals remain strong".

"The economy is expected to grow continuously next year due to robust domestic demand as a principle driver of growth, an upward investment cycle and continued growth in tourism," he said.

In a statement explaining the policy decision, Paiboon said inflationary pressures, while currently stable, were expected to increase in future due to higher input costs driven by economic expansion.

Official figures Wednesday showed inflation in November at 2.8 percent year-on-year, unchanged from the previous month's rise.

The consumer price index (CPI) rose 3.4 percent for the first 11 months of 2010 from a year earlier, according to commerce ministry permanent secretary Yanyong Phuangrach. He predicted the full-year rate would be 3.3 percent.

Core inflation, which excludes food and energy sectors, was 1.1 percent in November year-on-year, down from 1.3 percent in October.

The Bank of Thailand raised rates for the first time since 2008 in July, part of a wave of similar moves in Taiwan, India and Malaysia that indicated growing confidence in the economic outlook by monetary policymakers in Asia.

The cost of borrowing was raised again in August, but the central bank paused for breath in October as the Thai baht, along with other Asian currencies, surged against the US dollar, hitting a 13-year high.

Higher interest rates -- as well as strong economic performance and buoyant stock markets -- are blamed for a flood of foreign funds into the region that has pushed up currencies and threatened the competitiveness of exports.

Thiti Tantikulanan, head of capital markets at Kasikorn Bank, said the hike initially took markets by surprise, but the rate was still "very low compared to the 3.75 percent before the crisis in 2008".

He said the decision was likely to be driven by a desire to avoid the below-normal rates driving investment bubbles in the stock and real estate markets.

The Thai economy has remained relatively resilient in the face of deadly political violence earlier this year, but has not been immune to a slowdown in US and European economic growth as well as a slumping dollar.

Official figures last month showed the kingdom slipped back into recession, contracting slightly for two consecutive quarter-on-quarter periods.

But with gross domestic product growing 10.6 percent in the first half of 2010 year-on-year, with a 6.7 percent expansion in the third quarter, the government has upgraded its full-year forecast slightly, to 7.9 percent.

The strong baht, along with slow economic growth in some trade destination nations, was blamed for weaker growth in the key export sector in October, up 15.7 percent annually compared with a 21.2 percent increase in September.

But the government has revised its 2010 export growth target to about 25 percent, up from a previous projection of 20 percent.

-- (c) Copyright AFP 2010-12-01

[Chunky1]

government inflation numbers are total BS, which anyone who lives and spend money in Thailand can attest to.

[webfact]

Related topic:

Thai Inflation Stable In November

Follow this link:

[pipo1000]

government inflation numbers are total BS, which anyone who lives and spend money in Thailand can attest to.

They are probably as accurate as their tourist arrival numbers and estimates.

Didn't know by the way that interest hikes were effective in curbing the Baht strenght.

[nong38]

I look forward to bit more interest on my account which a b it of good news

[Pib]

I'll be surprised if the banks raise saving account rates by 0.25% to match the 0.25% BOT increase...they might go up 0.10%. But I do expect the banks to raise their loan rates by 0.25%, with most of them increasing their loan rates within a week or so.

[kuffki]

well 0.25 is hardly a "hike"

As for inflation, again just the other day Thailand was in recession, is it out of it now?

Man, agency reporting this should really pin up what they release so at least they do not contradict each release

Edited December 1, 2010 by kuffki

[asiawatcher]

Despite owning property in Thailand and having a business try borrowing at anything like these quoted rates.

[nong38]

Despite owning property in Thailand and having a business try borrowing at anything like these quoted rates.

That is the way of the world is it not, always seems to be facing in the opposite direction to you and mem heads I win tails you lose.

[housepainter]

I THOUGHT THAT TOO......... MORE INTEREST AT THE BANK THEN? IS THAT RIGHT?

LUCKY TO GET HALF A PERCENT IN THE UK YET HERE THEY CAN AFFORD TO SHELL OUT 2%

IF ONLY I COULD TRUST THEM NOT TO HAVE IT DISAPPEAR AND TELL ME IT NEVER EXISTED LIKE A FRIEND OF MINE EXPERIENCED WHEN HE TRANSFERRED SEVERAL MILLION ACROSS.

[Pib]

That might explain the several million baht deposit in my account I wasn't expecting. Thanks.

[mythBuster]

Good. no more complaining that the currency becomes too expensive I suppose.

[Thai at Heart]

25 to the USD coming.

Two weeks ago, they were saying that they don't want to hurt exporters and they effectively barricaded 30 or 29. something to the USD. Now they put up interest rates.

It is a big signal.

[gregb]

I bet my mortgage rates are raised before next month's bill hits. It took 'em about 6 months to drop in 2008 when they lowered the rates, and then it was a paltry half percent compared to the huge drop in the repurchase rate.

Oh I know. They aren't the same thing. Bankers need Mercedes too after all. God forbid they should have to fly coach like the rest of us.

Bankers are scum. End of story. I've just gotten used to the fact that I am going to be fleeced no matter what I do. This is Thailand after all. I should just expect it.

[featography]

I look forward to bit more interest on my account which a b it of good news

Where pray tell, are you making interest?? My understanding is farang dont get interest on their money in Thai banks.

[12DrinkMore]

Bankers are scum. End of story. I've just gotten used to the fact that I am going to be fleeced no matter what I do. This is Thailand after all. I should just expect it.

No need to add in the sentence relating to Thailand.

All over the world the bankers are scum.

[Chunky1]

If you want to earn interest, buy gold.